Coronavirus and Your Debt

Virtually overnight, the COVID-19 pandemic has upended day-to-day life in the United States, and has brought with it a dizzying rate of change. Although the entire United States has not been quarantined as of this writing, many states, cities and counties have enacted “shelter in place” orders and the closing of all non-essential businesses. As a result, the majority of employees now work remotely.

Many schools have closed, with online education stepping up to the fore. Meetings are no longer held in person, but over Zoom videoconferencing. Many strained medical systems that have yet to face the worst of the crisis have begun to rely more upon telemedicine.

Trips to the grocery store are met with barren shelves and a heightened state of anxiety as ever-present health concerns become increasingly real by the day. And in the shadow of it all, the U.S. economy teeters on the precipice of an ice age of extreme unemployment, a severely constrained consumer, a volatile and downward-trending stock market, and a grossly uncertain future.

None of this is good news, and for now, the silver linings have to wait. Amidst the mess, many bills still need to be paid – not the least of which are monthly debt payments. So, what happens to people carrying debt during a crisis such as the one we now face with the Coronavirus? Let’s take a closer look.

If your finances have been affected by the Coronavirus outbreak, you’re not alone. Just as there’s no place to hide from the virus (aside from staying sheltered at home), in many cases, there’s no place to hide from the financial impact of the virus.

Fortunately, since we are all in this together, many banks, credit card lenders and other financial institutions are responding in a manner that takes their customers’ financial hardships into account. The websites of numerous credit card lenders now include notices related to various types of assistance available to customers. This includes help related to missed payments, credit line extensions, and collection forbearance.

Similarly, banks, credit unions and other financial institutions are extending deferred payment options and loan extensions on personal loans and small business loans during the crisis.

Consult the websites of your specific credit card companies, banks and financial institutions for relevant details, and plan ahead for a lengthy wait to speak to an overburdened customer service associate.

As of March 13, 2020, the Department of Education initiated a 60-day forbearance period during which Federal student loan payments have been suspended for sixty days without any penalties.

However, borrowers need to contact their loan service to be granted the forbearance. Meantime, interest rates on Federal student loans have been set to 0% for sixty days.

Furthermore, under the Senate Coronavirus Stimulus Bill, which the House of Representatives is expected to pass on March 27th, payments would automatically be suspended without any interest expense for six months the collection of any defaulted Federal student loan related debts will also be suspended for sixty days.

When it comes to making timely monthly mortgage payments during the Coronavirus crisis, you could be eligible for deferment and/or a waiver on any late fees, as well as a moratorium on any reporting of delinquent payments to the three major credit bureaus (Experian, Equifax and TransUnion).

Individual states are also taking action, as California announced on March 25th that eligible homeowners would be able to defer mortgage payments for at least three months after the state negotiated a relief package with Citibank, JPMorgan Chase, Wells Fargo and U.S. Bank.

The Federal government has also announced that citizens with Fannie Mae or Freddie Mac loans are eligible to defer mortgage payments while remaining protected from any possible foreclosure.

Meantime, many states, cities and counties – particularly those that have already declared states of emergency – are protecting renters by having instituted a complete ban on evictions.

All debtors who are experiencing financial hardship should contact their lenders and creditors to calmly explain their situation and discuss available options.

Evaluate your budget and updated levels of cash inflow to determine what amount you can pay on your monthly debts – whether it is the minimum or something less. Be prepared with your notes and calculations before entering into the discussion with your lenders.

They are people too who are going through this same crisis – we all are in this together – these are not normal times, and it is more than possible that with the right amount of preparation, your politely and efficiently communicated message can result in an agreed upon monthly amount that strikes an acceptable middle ground.

You should also stay on top of your credit reports, as you want to make certain that any adverse actions that could result from late or missed payments are not noted on your credit profile during the crisis.

You are entitled to a free credit report from each of the three major credit bureaus every twelve months through annualcreditreport.com. During the crisis, it is not unreasonable to request that your creditors not report late or missed payments to the three major credit bureaus.

To that end, Equifax and the Consumer Data Industry Association are providing guidance to creditors and lenders as to how they can best work with those affected by the Coronavirus crisis.

You should also consider adding a 100-word consumer statement to your credit reports explaining your situation – something to the effect of: Please be advised that the negative accounts on my credit report are related to the Coronavirus crisis and I intend to make these accounts whole as soon as possible.

Regardless of how crazy the world may seem today, things will eventually return to a new level of “normal.”

We don’t really know when that will be just yet, nor can we fully anticipate all of the major changes that will result in American culture and society in a “post-Corona” world.

Let the crisis serve as a reminder of many things – not the least of which is that your health is more important than anything – your life and well-being will always be more important than money.

That said, you can’t expect the crisis to wipe away your debt balances. It won’t happen. But you can reach out to all of your creditors and lenders in a calm and prepared manner for help.

Steven Brachman is the lead content provider for UnitedSettlement.com. A graduate of the University of Michigan with a B.A. in Economics, Steven spent several years as a registered representative in the securities industry before moving on to equity research and trading. He is also an experienced test-prep professional and admissions consultant to aspiring graduate business school students. In his spare time, Steven enjoys writing, reading, travel, music and fantasy sports.

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